3rd Mar 2008 07:06
Emblaze Ltd. Magic Software Reports Record Q4 Revenues 5th Consecutive Quarter of Top Line Growth 4th Consecutive Quarter of Profitability Yield Profit for Full-Year 2007 Significant Gross Margin Improvement
Ra'anana, Israel, 03 March 2008 - Emblaze Ltd ("Emblaze" or "the Group") announces that Magic Software Enterprises ("Magic" or "the Company"), a member of the Emblaze/Formula Group and a leading provider of business integration, application development and deployment tools, announced its financial results for the fourth quarter and full year ended December 31, 2007.
During the fourth quarter of 2007, Magic sold its wholly owned subsidiary, Advanced Answers on Demand (AAOD), to Fortissimo Capital for the sum of $17 million in cash. As part of the transaction, the Company entered into a three-year license agreement with AAOD to allow AAOD to continue resell Magic's portfolio of leading products. In accordance with U.S. GAAP (Generally Accepted Accounting Principles), AAOD's results have been recorded as discontinued operations for all presented periods.
Results for the Fourth Quarter and Full Year 2007
On the basis of U.S. GAAP, which excludes the contribution of AAOD (see above), the Company's revenues for the fourth quarter were $15.7 million, an increase of 14% compared with $13.8 million in the fourth quarter of 2006, and up 7% compared with $14.7 million in the third quarter of 2007.
Including the contribution of AAOD for all periods, the Company's pro-forma revenues for the fourth quarter of 2007 were $19.2 million for the fourth quarter of 2007, a 19% increase as compared with $16.2 million in the fourth quarter of 2006, and a 9% increase compared with $17.6 million in the third quarter of 2007.
On the basis of U.S. GAAP, operating income for the fourth quarter of 2007 was $0.2 million, the same as in the third quarter of 2007. In the fourth quarter of 2006, Magic recorded an operating loss of $0.5 million. Net profit for the fourth of 2007 before discontinued operations was $0.3 million, compared to $0.1 million in the third quarter of 2007, and a net loss of $46,000 in the fourth quarter of 2006. Net income from discontinued operations was $9.7 million in the fourth quarter of 2007, of which $9.3 million was a one time capital gain. In the third quarter of 2007, Magic recorded net income from discontinued operations of $0.7 million, and in the fourth quarter of 2006, $76,000. GAAP net profit for the period was $10.0 million, or $0.32 per share compared to $0.8 million, or $0.02 per share, in the third quarter of 2007, and a net profit of $30,000, or $0.00 per share, in the fourth quarter of 2006.
GAAP results include amortization expense as well as non-cash charges taken for the capitalization of intangible assets and stock-based compensation.
Excluding these expenses, non-GAAP operating income for the fourth quarter was $0.3 million, compared with $0.4 million from the third quarter of 2007, and compared to the $0.3 million operating loss recorded in the fourth quarter of 2006. Non-GAAP net profit for the period before discontinued operations was $0.4 million, compared to $0.3 million in the third quarter of 2007, and $0.2 million in the fourth quarter of 2006. Non-GAAP net profit for the period was $10.1 million, or $0.32 per share compared to $0.9 million, or $0.03 per share, in the third quarter of 2007, and $0.2 million, or $0.01 per share, in the fourth quarter of 2006.
Reconciliation between GAAP and Non-GAAP results is summarized in the following table. For a complete reconciliation, please refer to the tables appended to this release.
(In millions of U.S. dollars, except per share data)
U.S. GAAP Q4 2007 Q4 2006 2007 2006 Revenues $15.7 $13.8 $58.4 $52.6 Operating income 0.2 (0.5) 1.3 (6.7) (loss) Net income (loss) 10.0 0.0 12.6 (5.0) Basic EPS (loss) $0.32 $0.00 $0.40 $(0.16) Non-GAAP Q4 2007 Q4 2006 2007 2006 Revenues $15.7 $13.8 $58.4 $52.6 Operating income 0.3 (0.3) 1.5 (6.3) (loss) Net income (loss) 10.1 0.2 12.8 (4.5) Basic EPS (loss) $0.32 $0.01 $0.41 $(0.15)
Results for the Full Year
GAAP revenues for the year ended December 31, 2007 were $58.4 million (which excludes $11.6 million from discontinued operations), compared to $52.6 million in the year ended December 31, 2006 (which excludes $8.9 million from discontinued operations). Pro-forma revenues for the year ended December 31, 2007 were $70.0 million, an increase of 14% from the $61.5 million in the year ended December 31, 2006.
On a U.S. GAAP basis, operating income for year 2007 reached $1.3 million compared to an operating loss of $6.7 million in 2006. Net profit for 2007 before discontinued operations was $1.1 million, compared to net loss of $6.3 million in 2006. Net income from discontinued operations was $11.5 million in 2007, including the aforementioned $9.3 million one-time capital gain. In 2006 the Company recorded net income from discontinued operations of $1.3 million. Net profit for 2007 on a GAAP basis was $12.6 million, or $0.40 per share, compared to a net loss of $5.0 million, or $0.16 per share, recorded in 2006. On a non-GAAP basis, operating income for 2007 reached $1.5 million compared to an operating loss of $6.3 million in 2006. Net profit for 2007 on a non-GAAP basis was $12.8 million, or $0.41 per share, compared to a net loss of $4.5 million, or $0.15 per share, recorded in 2006.
Comments of Management
Commenting on the results, Eitan Naor, President and CEO of Magic Software Enterprises, said: "We are pleased to report a strong fourth quarter in line with our plan for returning the Company to consistent growth and profitability. Working systematically, we have reorganized Magic in line with our strategic objectives, strengthened and focused our product lines, and enhanced our marketing channels. We are pleased that our revenues from license sales continue to ramp up, a reflection of an increased upgrade rate among our existing customers as well as the growth of our partner activities. Our divestiture of AAOD is an important step that allows us to focus on core businesses while contributing significant capital. In parallel, the effects of our efficiency program have begun to take hold, enabling us to improve our profitability."
Mr. Naor continued, "In the year ahead, our strategy will focus on the continued build out of our core businesses, and aggressive pursuit of emerging opportunities. We will allocate significant resources to the penetration of high-growth market segments, such as the Software-as-a-Service arena, which brings with it a need for next-generation business integration offerings. Taken as a whole, with excellent products and technologies, a strong and motivated management team and exciting opportunities on the horizon, we believe we are well positioned and are working to achieve our full potential."
Highlights of the Fourth Quarter
* Increased license sales * Increased OEM sales and activities * Increased penetration into leading Enterprise Application ecosystems * Growth in number of SAP Business One channel partners * Continuing growth of eDeveloper V10 momentum as existing customers upgrade their deployments * Initial penetration into Software-as-a-Service market and development of Software-as-a-Service-Enabled Application Platform
Non-GAAP Financial Measures
This release includes non-GAAP basic and diluted earnings per share and other non-GAAP financial measures, including cost of service, research and development, selling, general and administrative, operating income, income taxes and net income. These non-GAAP measures exclude the following items:
* Amortization of purchased intangible assets; * In-process research and development capitalization and; * Equity-based compensation expense.
Magic's management believes that the presentation of non-GAAP measures provide useful information to investors and management regarding financial and business trends relating to Magic's financial condition and results of operations as well as the net amount of cash generated by its business operations after taking into account capital spending required to maintain or expand the business.
For its internal budgeting process and in monitoring the results of the business, Magic's management uses financial statements that do not include amortization of purchased intangible assets, in-process research and development capitalization and equity-based compensation expense. Magic's management also uses the foregoing non-GAAP financial measures, in addition to the corresponding GAAP measures, in reviewing the Company's financial results.
These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Magic believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Magic's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic's results of operations in conjunction with the corresponding GAAP measures.
Please refer to the Reconciliation of Selected Financial Metrics from GAAP toNon-GAAP tables below.Enquiries:Emblaze Hadas Gazit, Hagit Gal + 972 9 7699302/ 339 Eisenberg-Eliash LTD. Investor & Public relations (Israel) Amir Eisenberg +972 3 7538828 About Magic Software
Magic Software Enterprises Ltd. has been a leader in enterprise application development, deployment and integration technology for more than two decades. Magic's service-oriented (SOA) platforms are used by companies worldwide to develop, maintain, and deploy both legacy and new business solutions, while integrating these applications across both internal and external, heterogeneous environments. Magic Software's platform-independent methodology lets companies achieve agility by quickly assembling composite applications, allowing programmers to create services and architects and business analysts to orchestrate and reuse these services to enable business processes. Through partnerships with industry leaders such as IBM and SAP and more than 2500 ISVs worldwide, Magic Software technology is used by more than 1.5 million customers around the globe. For more information on Magic Software Enterprises and its products and services, visit www.magicsoftware.com.
Magic Software is a subsidiary of Formula Systems in the Emblaze Group of companies.
Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both here and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission.
About Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and innovation activities thus combining the stability of "bread and butter" mature technology enterprises with "high-risk / high-reward" investments in innovation.
Growth activities
Formula Systems,which includes:
* Magic Software Enterprises Ltd. develops, markets and supports composite application development and deployment platforms with a service-oriented architecture (SOA), including application integration and business process management (BPM), with existing and legacy systems; * Matrix IT Ltd. (TASE: MTRX) is one of Israel's leading integration and information technology services companies, active in four principal areas: software solutions and services, software products, infrastructure solutions and hardware products, and training and assimilation. * Sapiens International Corporation N.V. is a provider of IT solutions that modernize business processes to enable insurance and other companies to quickly adapt to changes. * nextSource Inc., designs, develops and implements web-based, high quality, innovative human capital management solutions.
Innovation activities
* Emblaze Mobile, an designer of advanced mobile devices;
* emoze, a free global Push Email technology for mobile devices
* ZONE-IP (Emblaze V CON), a provider of wireless video communications
technologies and conferencing solutions for operators and enterprise
markets over IP networks
* Orca Interactive , provider of Interactive Television IPTV
middleware for Video On Demand (VOD) and broadcast services ; and
* Visual Defence , (minority stake) a wireless and IP video
solutions provider for military and homeland security markets.
Emblaze Group is traded on the London Stock Exchange since 1996.
www.Emblaze.comMagic Software Enterprises Ltd Consolidated Statements of Operations (In thousands of U.S. dollars, except per share data) Three months ended Twelve months ended December 31, December 31, 2007 2006 2007 2006 (unaudited) (unaudited) (unaudited) (unaudited) Sales 15,679 13,827 58,428 52,571 Cost of sales 6,612 6,279 27,340 25,167 Gross profit 9,067 7,548 31,088 27,404 Software development costs, 837 458 2,716 2,462net Selling, general and 8,076 7,385 27,090 29,500administrative expenses Restructuring expenses - 167 - 2,153 Total operating expenses 8,913 8,010 29,806 34,115 Operating income (loss) 154 (462) 1,282 (6,711) Financial income, net 136 218 160 332 Other income, net 95 278 170 278 Income (loss) before taxes 385 34 1,612 (6,101) Taxes on income 49 39 362 310 336 (5) 1,250 (6,411) Minority interest (17) (37) (22) 71 Equity gain (loss) (35) (4) (86) 16 Net income (loss) before 284 (46) 1,142 (6,324)discontinued operation Net income from 9,733 76 11,465 1,318discontinued operation Net income (loss) after 10,017 30 12,607 (5,006)discontinued operation Basic net earnings (loss) $0.32 $0.0 $0.40 $(0.16)per ordinary share Diluted net earnings (loss) $0.31 $0.0 $0.39 $(0.16)per ordinary share
Weighted average number of 31,520 31,285 31,443 31,184 ordinary shares used in
computing basic net earnings (loss) per ordinary share
Weighted average number of 31,993 31,773 32,023 31,184 ordinary shares used in
computing diluted net earnings (loss) per ordinary share Magic Software Enterprises Ltd RECONCILIATION OF GAAP TO NON-GAAP RESULTS (In thousandsof U.S. dollars, except per share data) Three months ended Twelfth months ended December 31, December 31, 2007 2006 2007 2006 (unaudited) (unaudited) (unaudited) (unaudited) GAAP operating income 154 (462) 1,282 (6,711)(loss)
Amortization of intangibles 583 1,185 2,761 3,965
Capitalization of software (717) (1,005) (3,027) (3,535) development
Stock-based compensation 248 27 434 27 Total adjustments to GAAP 114 207 168 457 Non-GAAP operating income 268 (255) 1,450 (6,254)(loss) GAAP net income (loss) 284 (46) 1,142 (6,324)before discontinued operation Total adjustments to GAAP 114 207 168 457as above Non-GAAP net income (loss) 398 161 1,310 (5,867)before discontinued operation GAAP net income (loss) 10,017 30 12,607 (5,006) Total adjustments to GAAP 114 207 168 457as above Non-GAAP 10,131 237 12,775 (4,549) Non-GAAP basic earnings $0.32 $0.01 $0.41 $(0.15)(loss) per share
Weighted average number of 31,520 31,285 31,443 31,184 ordinary shares used in
computing basic net earnings (loss) per ordinary share
Non-GAAP diluted earnings $0.32 $0.01 $0.40 $(0.15) (loss) per share
Weighted average number of 31,993 31,773 32,023 31,184 ordinary shares used in
computing diluted net earnings (loss) per ordinary share Magic Software Enterprises Ltd Consolidated Balance Sheets (In thousandsof U.S. dollars) As of As of December 31, December 31, 2007 2006 (unaudited) (unaudited) ASSETS Current Assets Cash and cash equivalents 12,178 6,935 Short term bank deposits 89 69 Marketable securities 4,090 4,649 Trade accounts receivable 12,941 10,797 Other receivables and prepaid expenses 2,010 2,437 Inventory 124 249 Debtors from a subsidiaries sale 16,000 - Total Current Assets 47,308 24,887 Non-Current Assets Severance pay fund 1,925 2,176 Long term deposits 472 522 Investment in affiliated companies 127 213 Fixed assets, net 5,758 6,049 Goodwill 15,986 15,693 Other assets, net 10,681 10,270 Assets from discontinued operation 41 11,362 Total Non-Current Assets 34,990 46,285 Total Assets 82,298 71,172 Current Liabilities Short-term credit from banks 3,621 4,514 Trade accounts payable 2,999 3,053 Accrued expenses and other liabilities 11,483 9,582 Total Current Liabilities 18,103 17,149 Non-Current Liabilities Long-term loans 132 233 Accrued severance pay 2,316 2,499 Minority interests 0 131 Liabilities from discontinued operation 503 3,516 Total Non-Current Liabilities 2,951 6,379 Shareholders' Equity 61,244 47,644 Total Liabilities and Shareholders' 82,298 71,172
Equity
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